The case for tail spend management
If you check out our blog often, you know that at Fairmarkit we think that tail spend management matters We feel so strongly about it because our team has been able to help quantify the tail spend problem by reviewing client data sets to help to determine areas of large savings opportunity and high-risk categories, products, and suppliers. We recently ran the numbers on our work with the MBTA and the results we’ve found using our platform are really impressive. Through our collaboration, the MBTA:
- Increased the number of bids while reducing order prices by 5% to 40%, achieving a $100K+ monthly savings.
- Received an average of 3+ bids per RFQ, with 25% of the requests generating 5+ bids
- Found a 15% reduction in time spent per purchase, leading to greater employee efficiency.
If you’re interested in hearing more about our work with the MBTA, check out our newly released case study. But we don’t want you to only take our word for it – there are a lot of reputable third party organizations who have found value in tail spend management as well, for example:
- According to A.T. Kearney, “companies can realize benefits of 10 percent to 15 percent across a broad range of tail spend with 50 percent fewer resources when they adopt tail spend best practices.”
- Gartner predicts tail spend management will experience major changes in the coming year and “by 2022, 75% of all B2B tail spend goods will be purchased in an online marketplace like Amazon Business or Alibaba’s 1688.com.”
- Accenture found that since tail spend “is managed by procurement professionals, companies typically can achieve a one-time savings of 10 to 15 percent when addressing this spend the first time, and 2 to 5 percent per year in savings thereafter.”
While there continue to be hurdles that come in the way of tail spend management, including lack of visibility, time restraints and upfront technology costs, the long term benefits of addressing the issue cannot be ignored.